Multistage Information Transmission with Voluntary Monetary Transfer

Hitoshi Sadakane

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: I analyze a cheap talk model in which an informed sender and an uninformed receiver engage in finite-period communication before the receiver chooses a project. During the communication phase, the sender can gradually convey information through multistage cheap talk communication and the receiver can pay money to the sender voluntarily whenever she receives a message. My results show that under some conditions, (i) the receiver can extract more detailed information from the sender than that in the model of one-shot cheap talk communication and (ii) there exists an equilibrium whose outcome Pareto-dominates all the equilibrium outcomes in the model of one-shot cheap talk communication. Moreover, I find an upper bound of the receiver's equilibrium payoff and provide a sufficient condition for it to be approximated by the receiver's payoff under a certain equilibrium. This result shows that multistage information transmission with voluntary monetary transfer can be more beneficial for the receiver than a wide class of other communication protocols (e.g., mediation and arbitration).

Date: 2017-06, Revised 2018-06
New Economics Papers: this item is included in nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1006r

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